Tory conference: Osborne rules out temporary tax cuts

 

Chancellor George Osborne's full speech to the Conservative Party conference in Manchester.

Chancellor George Osborne has said taxes will only be cut when the government can afford to do so, in a speech to the Conservative conference.

Mr Osborne has found £805m to freeze council tax in England in 2012-13 - saving people £72 a year.

But he stressed that money is still tight and there will be no deviation from his deficit reduction plan.

He said solving the eurozone crisis remains the most important factor in kick starting growth in the UK.

The chancellor has been under pressure from Labour to cut VAT to inject money into the economy - and from senior figures in his own party to scrap the 50p top rate of income tax.

'Debt crisis'

But in a sober speech to party activists, the chancellor said it would be wrong to borrow money to fund temporary tax cuts or increase public spending.

He did, however, announce that the Treasury would engage in "credit easing" - a move aimed at cutting the cost of borrowing for hard-pressed businesses, as well as improving access to loans.

The BBC's business editor Robert Peston said the move, which would involve the public sector buying bonds issues by companies, was "potentially very significant" but full details would not be revealed until the chancellor's autumn statement in November.

In his speech, Mr Osborne said he had "thought hard" about what more can be done to boost growth and explored "every single option" - but "borrowing too much is the cause of Britain's problems, not the solution".

ANALYSIS

The most significant announcement in the chancellor's speech is also the one fewest will understand.

It is his pledge that the Treasury will engage in "credit easing" - ie some as yet unspecified way to underwrite loans to small businesses who are struggling to get credit now.

The speech that they are quoting at the top of government is by Adam Posen (a member of the Bank of England's interest rate-setting committee).

Although I'm told that his proposal for a new bank may take too long to implement.

"We would be risking our nation's credit rating for a few billion pounds more, when that amount is dwarfed by the scale and power of the daily flows of money in the international bond markets, swirling around ready to pick off the next country.

"We will not take that risk. We are in a debt crisis, it is not like a normal recovery. You can't borrow your way out of debt."

And he added: "I'm a believer in tax cuts - permanent tax cuts paid for by sound public finances.

"Right now, temporary tax cuts or more spending are two sides of exactly the same coin, a coin that has to be borrowed - more debt that has to be paid off."

Mr Osborne said Britain's economic troubles were caused by the "catastrophic mistakes" of the previous Labour administration, as well as banks which "let down their customers, let down their shareholders and let down this country".

'Underspend'

He said the government is helping businesses by keeping interest rates low - "the most powerful stimulus that exists" - but borrowing billions of pounds more would put that at risk.

Mr Osborne's speech comes as the Institute of Directors called for a fresh effort to boost economic growth in the UK.

The chancellor announced increased investment in scientific research and the extension of mobile phone coverage to six million people - as well as extra cash from a Whitehall "underspend" to fund a council tax freeze.

Start Quote

His speech really seemed incredibly complacent and quite frankly out of touch”

End Quote Chris Leslie Labour

The government cannot force councils to freeze bills but it is offering to give those that limit spending rises to 2.5% the money they need.

Money would also be offered to the Scottish and Welsh administrations, which will choose how it is spent.

Speaking earlier to BBC News, Mr Osborne said a solution to the eurozone debt crisis must be found by the time the Group of 20 nations meet next month and failure to do so would be "terrible not just for Britain, not just for Europe, but for the entire world economy".

The chancellor, who is travelling to Luxembourg for a meeting with European finance ministers, told BBC News that the 17 eurozone nations meeting in Luxembourg on Monday must decisively figure out how to handle Greece's debts, and urged them to extend the size of their bailout fund.

Credit rating

The chancellor's speech comes as Standard and Poor's said it would hold the UK's credit rating at the highest possible level in light of its "wealthy and diversified economy" and said the outlook remained "stable".

But the agency, which released the announcement just as Mr Osborne took to the stage in Manchester, said the government's efforts to correct the UK's public finances would "weigh on the economy".

For Labour, shadow Treasury minister Chris Leslie said it was "staggering" the speech did not give more attention to the "growth problem".

He said: "His speech really seemed incredibly complacent and quite frankly out of touch, out of touch with the realities of some of the costs that ordinary people face, the difficulties that businesses are facing and no plan for growth."

But Andrew Tyrie, the senior Conservative backbencher who said at the weekend that the government was not doing enough to promote economic growth, told the BBC: "I think it's a huge step forward, and will be widely welcomed not only in the party, but by all those people in the country who also need a growth strategy to help them move forward."

 

Comments

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  • rate this
    +2

    Comment number 714.

    The 2.5% the Government is offering is a temporary measure. When the money runs out, any increase to Council tax would be on the full bill, not the rebated figure we're paying now.

    What's wrong with tax breaks for companies that export? Rather than just promoting manufacturing as a cure-all/scape goat.

  • rate this
    +1

    Comment number 713.

    As long as this country is producing, people buy from this country, and money doesn't go abroad we are up. Those on the dole don't even take away, they don't contribute to growth, but don't take away as long as they buy british

    Mahatma Gandhi got India back on it's feet by cutting it's dependence on foreign imports mainly british

    This is why Thatcher destroyed our economy she sold our industry

  • rate this
    +2

    Comment number 712.

    #703: Have you ever actually compared an O-level syllabus or examination paper from the 1970s with an A-level paper from today? Thought not.
    It is also evident that the A-level curriculum of 30-40 years ago contained topics that today are only addressed in degree courses. If teachers concentrated on teaching rather than providing a cosy "environment" some of these deficiencies might be corrected.

  • rate this
    +1

    Comment number 711.

    708.Sue Doughcoup

    What has that got to do with paying his workers more money? Stop distracting with meaningless diversions and argue the point.

  • rate this
    +3

    Comment number 710.

    696.DoctorCocktail

    I'm afraid the picture is a tad more complex than that, defecit costs us money.
    Back in 1997, Total Government Guilts stood at approx £275 billion. As of Oct 2010 it had surpassed £1 trillion.
    It is important for the UK to keep it's AAA rating as this has enabled them to issue gilts with a 50 year life span offsetting debt.

  • rate this
    0

    Comment number 709.

    627 badlypackedkebab
    i agree they are all want power without substance.

  • rate this
    +1

    Comment number 708.

    700 - James Dyson Foundation. Or are you going to have a dig at this as well?

  • rate this
    +2

    Comment number 707.

    Hello # 688 EDIVTH.
    The reason we don't make stuff in this country is because it's cheaper to knock it out in places like China also there is nothing like the level of bureaucracy we have.
    I do not think education or the quality of students is the problem.
    Problem is government's have thrown the baby out with the bathwater with industry and put all our eggs in the banking basket which is stuffed.

  • rate this
    0

    Comment number 706.

    692 emmabirdgreen

    You do have a selective memory and are one of the most biased posters on here. Criticism for current government.

    Should raise income tax threshold to 10k
    Scrap current human rights legislation
    reduce overseas aid for now
    close certain tax loopholes
    introduce import tax
    tighter controls on banks, bonuses etc

    that ok?

  • rate this
    +6

    Comment number 705.

    I guess if another illegal war started money would magically appear.

    The man is undoubtedly a dangerous buffoon.

    My sympathy to the millions he's throwing on the dole

  • rate this
    0

    Comment number 704.

    693.
    Adam i cannot even find the words of contempt for you. Frankly frack the markets. They are part of the problem. They may also be part of the solution but only with derivatives outlawed and a refocus on real business. manufacture, innovation, R&D etc. I also suspect that under your ideas it would not get harder for you. idiot!

  • rate this
    +2

    Comment number 703.

    #698: You do not understand the effect the environment has on learning shows you know nothing about education!
    "The current A-level curriculum for science subjects is similar, possibly easier, than the O-levels of 30 years ago." And your evidence for this is what?.. becuase it says so in the Daily Mail? As somone who actually marks these A levels I can assure you this is a myth!

  • rate this
    -3

    Comment number 702.

    Any policy changes made now won't be felt for months, if not years. The time constants involved here are so long cause and effect are almost impossible to establish. Stick to the basics, growing debt is unsustainable, so you have to live within your means. The pain being felt now is down to the "good times", not policy changes being talked about now.

  • rate this
    +1

    Comment number 701.

    Taxing the taxpayer to death will not sort out the deficit; it will make it larger because it forces more businesses out of the country. While ConDemn do nothing to reduce immigration this just puts more on the dole for which we have to borrow more, increasing the deficit.

    Osbourne cannot fix the deficit in isolation. CondDemn has to sort out the drivers!

  • rate this
    0

    Comment number 700.

    697.Sue Doughcoup:

    That is the essence of business as we know it but it doesn't have to be that way and thats the problem. Surely, using Dyson as an example he could spare a couple of million to improve the lives of his workers who could then all own Dysons and buy local but instead he keeps it in his back pocket!

  • rate this
    +2

    Comment number 699.

    Mr Osbourne has lost any respect with this speech as it became less about how he was going to help the PEOPLE and more about how many stupid comments he could make about the labour party.
    Stop trying to get a one up with your mates george and start helping the PEOPLE!!

  • rate this
    0

    Comment number 698.

    #695: Please explain how the presence/absence of curtains relates to academic standards. No-one except those blinded by the propaganda emerging from gov't & self-appointed education "experts" can deny that there has been a major reduction in academic standards in recent decades. The current A-level curriculum for science subjects is similar, possibly easier, than the O-levels of 30 years ago.

  • rate this
    0

    Comment number 697.

    682. And why not, he must have spent thousands developing his products. And presumably workers are likewise only interested in squeezing what they can out of business. That's the essence of business, isn't it?

    681. Blame the government again, why not? It is not up to the government. It is up to us to have the intelligence to buy local in the conditions we live in. If it ain't local don't buy it

  • rate this
    +5

    Comment number 696.

    Milvusvestal. And when will people realise that austerity-only is NOT working. The deficit is getting larger! The only way out is growth and a proper, long-term plan for reduction. More people IN work means more tax. More people OUT of work means less tax and more benefits!!!

  • rate this
    +5

    Comment number 695.

    691.therealist
    "Actually the education sector expanded considerably under Labour, "Education Education Education" wasn't it? Unfortunately like most of labours ideas it was quantity not quality!"

    Actually academic standards were never as high as under Labour, I was a teacher under Thatcher and we could not even afford curtains for the classroom! It has been completely rebuilt by labour!

 

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